The current European crisis has highlighted the policy mistakes that were made in the process of European financial and monetary integration. It has exposed major deficits in the eurozone’s institutional framework, including insufficient macroeconomic policy coordination and the lack of a crisis response mechanism (which then had to be negotiated in the midst of crisis). One of the major failures that led to the current European predicament was that national and European policymakers allowed the build-up of huge macroeconomic imbalances within the eurozone. Wages and prices in southern “periphery” countries (with Ireland being an honorary member of the south) rose much more quickly than in the northern “core” countries such as Germany. The resulting loss of economic competitiveness of the periphery countries has led to a growth crisis that fed into a sovereign debt crisis after government finances were severely strained during the global financial crisis. Read more.

On 3 October 2011, Russian Prime Minister Vladimir Putin proposed the establishment of a Eurasian Union in an article published in the Russian broadsheet Izvestia. The article was entitled “New integration project for Eurasia – making the future today.” Read more.

East Asia’s substantially market-led economic integration is a very complex process and is leading to some surprising effects. One example is that of Australia’s booming trade and investment with the People’s Republic of China (PRC), which is pushing up the value of the Australian dollar, and consequently enticing Australian companies to outsource business processing services to the Philippines. Over the past decade, Australia has enjoyed one of the best economic performances of any OECD country. While many structural reforms over the past few decades and sound macroeconomic management have underpinned this, Australia’s closer relationship with the PRC has also played a major role. Read more.

Eighteen years ago, the World Bank published a landmark book, The East Asian Miracle. The report praised eight Asian economies for their rapid and sustained economic progress and highlighted the fact that they seemed to have evolved a model which combined growth with equity. What is the situation today? Today we have growth, but with much less equity. All our societies have grown more unequal, as measured by the gini coefficient and the ratio of average incomes of the top 20% and the bottom 20%. According to the World Bank’s latest statistics, the gini coefficient for Singapore was 0.48 in 2010. In the case of the People’s Republic of China (PRC), the gini coefficient has risen from around 0.30 in the early 1980s to around 0.47 in 2009. Some social scientists have warned that inequality which exceeds the gini coefficient of 0.4 could lead to social unrest. Even without social unrest, great inequality is a threat to social cohesion and harmony. The current trend in Asia is fundamentally objectionable because it is inconsistent with the very purpose of development which is to benefit all citizens. ADB is, therefore, right to make inclusive growth one of its three agendas in its Strategy 2020 document. Read more.

The services sector is becoming increasingly important in modern economies. In many of the most developed economies, it can represent two–thirds or even three–quarters of all economic activity. Even in developing economies, the services sector often accounts for a significant share of economic output and employment. International trade in services is also increasing in importance, and has been growing more rapidly than goods trade over recent years. It has also proven to be more resilient to the global financial crisis and resulting trade collapse. It has long been recognized that services trade can influence economic and social outcomes through a variety of mechanisms. Read more.

The current macroeconomic environment is far more unpredictable and difficult than just a few years ago. Asia’s central banks must evolve in order to adapt to this new landscape. Usually, a central bank’s role is to keep inflation low and stable. But with recent upheavals and financial market turmoil, they have also been charged with maintaining financial stability. To do this, central banks must increasingly work together and coordinate with other authorities. Such coordination—central to the region’s successful navigation of the 2008–2009 global financial crisis— does have implications for central bank objectivity. Central banks do not want to lose their often hard-won independence—an important factor in their operational effectiveness. Read more.